Survey: Military Families Cutting Debt

Joe Morrin

Amid growing concerns about the state of the economy, military families are intensifying their frugal financial behaviors by putting more dollars toward cutting debt.

The latest findings of the First Command Financial Behaviors Index indicate that military families are continuing to accelerate their debt reduction efforts. The average amount they are paying on long-term debt has reached $1,255, up considerably from $1,041 during the first quarter of 2008. The average monthly amount military families allocated to short- and long-term debt during the third quarter totaled $2,301, a 4 percent increase over the first quarter. During the same period, other middle-class Americans saw their average monthly debt reduction efforts slip by 4 percent to $2,159.

Economic worries are driving these growing debt reduction efforts. Concerns about the state of the economy were reported by three out of five survey respondents. And almost one out of four military families is concerned about job security.

At the same time, military households are easing back on the savings side. The average monthly amount they put into their savings and retirement accounts during the third quarter totaled $2,018, down 17 percent from the first quarter. Military families continue to out-save the rest of the middle class, which achieved a monthly average of just $1,517 during the third quarter.

How well are you managing your finances during the current economic downturn? You probably know some of the warning signs. Too many credit cards. Not enough savings. It's important to recognize when you may be getting in over your head. If you see flashing yellow lights as you review the following warning signs, take heed before it's too late.

Having Too Many You probably want to have at least one credit card for emergencies and for times when you'd rather not carry cash. But if you carry several credit cards and use most of them, you may be asking for trouble. It's easy to forget how much you've charged when you're using more than one or two cards. And, having several cards with open credit lines -- even if you haven't charged anything on them -- can lower your credit score.

Charging Too Much Being at or near your credit limits on one or more credit cards is a sure sign that you're overspending. If you can't pay off the balance each month when the bill comes due, you may be headed for trouble. When you're making only the minimum payments on your cards, it may take you several years -- 20 or more -- to pay off a large balance. Think about that the next time you're ready to charge an item such as clothing or electronics that will already be in the garbage bin long before you've stopped paying for it!

Not preparing for emergencies If you had to replace your roof or pay medical bills that aren't covered by insurance, where would the funds come from? Putting money into an emergency fund to cover unexpected expenses is one of the best ways to take control of your finances. Not having cash for emergencies can put you in a real financial bind.

Running out of money before paydayDoes your paycheck just cover your bills? Does buying something extra during the month leave you short of cash for necessities? Being constantly out of money is a warning sign that your resources are overcommitted. If you have little or no money left after each paycheck, it's time to change your spending habits.

If any of these warning signs seem familiar, maybe it's time to take charge of your finances. Come up with a plan for getting yourself out of debt -- and saving money for tomorrow in the process.

Joe Morrin is senior vice president and director of Financial Planning at First Command Financial Services Inc. Prior to joining First Command in 1986, he spent several years in the U.S Army, serving as a captain at the time of his departure.

Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index assesses trends among the American public's financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. (Note: Military data is collected twice a year in September and March through a survey of approximately 410 members of military households. The margin of error is +/- 4.8 percent.)